Potential of pro-poor water connection subsidies in Cambodia

After decades of conflict, Cambodian water planners are struggling to provide supplies to urban residents. Many households do not use water from a network connection. Instead they rely on dirty and unreliable sources. Getting poor householders connected is unlikely without subsidies and regulatory reform.

A paper from Middlebury College, in the USA, the University of Trento, in Italy, and the University of Sussex, in the UK, uses household data from a range of Cambodian urban settings to assess the demand for water and identify the main factors determining household access to network water.

Existing public utilities, which re-opened with depleted facilities in the 1980s, are now affected by frequent breakdowns and poor treatment quality. In the post-genocide recovery process public expenditure on water and sanitation was less than 0.1 percent of GDP. Some 60 percent of households in Phnom Penh are connected to water networks but outside the capital the urban coverage rate is only 15 percent. Many people obtain their water from rivers, streams, tanks, wells or private vendors. Vendors buy the water either from the network utilities or acquire it from rivers and tanks and sell it on without treatment, charging prices that are usually about ten times higher than the official rate.

There is little official understanding of how to assess water demand and consumer willingness to pay. Legal and regulatory structures are confused. The process of awarding concessions to private utility operators has lacked transparency.

An examination of 200 household variables and price data reveals that:

• Educational attainment levels are higher among connected households compared to non-connected ones.
• Members of an ethnic (mainly Chinese) minority are more likely to be connected compared to the majority Khmer group.
• Connected households have significantly greater assets than non-connected ones: a household with a telephone is 33 percent more likely to be connected than a household without a telephone.
• A one percent increase in the water connection fee reduces the probability of a household getting connected by about two-fifths.

The researchers advise policymakers – in Cambodia and other developing countries – to use targeted subsidies to encourage more poor households to connect. Once they are connected even the less well-off households may be able to afford a non-subsidised tariff. This advice is based on growing evidence that with targeted connection subsidies, the probability of excluding a deserving household is significantly smaller than with a general consumption subsidy. Poorer households are often willing to pay more for water and sanitation services than what they cost to operate and maintain.

The authors urge the Cambodian authorities to:

• better manage existing resources aimed at the provision of safe water targeted at the poorest, which could then provide the financial resources for a connection subsidy programme
• discuss with donors and concession operators how to finance a connection subsidy programme
• in addition to connection subsidies, consider other factors to improve service access and provision, such as developing sound regulations for the sector
• give an autonomous regulator a clear remit to promote accountability, transparency and competition between the public and private sectors
• undertake research comparing the efficiency of the private and public sectors
• generate data regarding the welfare effects associated with connection to and use of a water system.

Source(s):
‘The Determinants of Water Connection and Water Consumption: Empirical Evidence from a Cambodian Household Survey’, World Development, 36, pages 953–968, by Marcello Basani, Jonathan Isham and Barry Reilly, 2008 Full document.

id21 Research Highlight: 1 March 2009

Further Information:
Marcello Basani
Department of Economics
University of Trento
via Inama n. 5 - 38100
Trento, Italy

Tel: +39 0461 882100
Contact the contributor: marcello.basani@economia.unitn.it

Department of Economics, University of Trento, Italy

Jonathan Isham
Department of Economics
Munroe Hall
Middlebury College
Middlebury VT 05753, USA

Contact the contributor: jisham@middlebury.edu

Department of Economics, Middlebury College, USA

Barry Reilly
Department of Economics
University of Sussex
Falmer
Brighton BN1 9SN, UK

Tel: +44 (0) 1273 606755 ext. 2473
Fax: +44 (0) 1273 673563
Contact the contributor: b.m.reilly@sussex.ac.uk

Department of Economics, University of Sussex, Brighton, UK

Other related links:
'New approaches to water sector governance'

'Success for water cooperative in Bolivia'

'Consumer behaviour studies to improve water supply to poor urban residents'